Suing The Engineer / Adjuster

A case from the Southern District, Laredo Division has an interesting twist for insurance lawyers to know about. The case is styled, Luis Gonzalez v. State Auto Property & Casualty Insurance Company, et al.

A hailstorm caused damage to the roof on Luis home and he submitted a claim to State Auto. State Auto hired Haag Engineering, one of the defendants in this case, to help inspect the roof damage. Haag prepared an engineering report that State Auto relied upon when it adjusted and allegedly undervalued Luis roof damage.

Luis filed suit in State Court. The defendants removed the case to Federal Court alleging that Haag was improperly joined for the purpose of defeating diversity jurisdiction under 28 U.S.C. Section 1441.

Luis petition alleges only one possible cause of action against Haag: unfair settlement practices under Texas Insurance Code, Section 541.060. But a claim under Chapter 541 can only be brought against a person “engaged in the business of insurance” pursuant to Section 541.002(2). Thus, the only question for the Court is whether Haag, an engineering firm and its engineers fall into this category.

In another case, the Fifth Circuit addressed the relationship between engineers and Chapter 541. In that case, the engineer hired by the insurance company to help determine the cause and extent of damage to the plaintiffs home was sued to help defeat diversity jurisdiction. The argument was that the engineer could be liable under Chapter 541 because he acted as a defacto engineer. Although the Court agreed that adjusters can be liable, they found that the engineer was not an adjuster. The engineer did not have an adjusting license and he did not provide insurance or adjusting services. This decision was reached even though the insurance company relied on the engineers report to reach its decision.

As one federal district court has pointed out, equating the investigating and adjusting of an insurance claim would dramatically expand the coverage of the Texas Insurance Code.

For example, an accident-reconstruction expert asked to determine an accident’s cause and every medical expert asked to determine the cause of death would face liability under the Texas Insurance Code—a conclusion that is not supported by its text or any case interpreting it.

Luis allegations are unclear whether Haag acted as adjusters or merely as experts hired to provide State Auto with information. Because of this ambiguity, the Court will pierce the pleadings and consider affidavits from the engineers. The affidavits confirm that Haag is an engineering firm that contracted with State Auto to perform engineering services and played no role in adjusting the claim. Luis did not contest these affidavits or submit evidence to undermine them. Luis relies solely on the unsupported statements in his petition.

After considering this evidence, the Court concluded that Haag is not in the business of insurance. They did not decide whether the damage was covered under the State Auto policy not how much to pay on Luis claim if it was covered. In short, they are engineers, not insurance adjusters.

Thus, Haag was improperly joined and Luis motion to remand is Denied.